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PERSPECTIVE: Broadsheets must make use of cover revenue cut tactic profits

One of the nice things about writing a weekly column is that one
minute you’re sitting there wondering how to fill the next one when
someone rings up to complain about the last one ... and your problem’s
solved.

One of the nice things about writing a weekly column is that one

minute you’re sitting there wondering how to fill the next one when

someone rings up to complain about the last one ... and your problem’s

solved.

So my thanks go out to a man from the Independent who rang up to give me

some grief about last week’s column.

Naturally we had to agree to disagree, but in the course of the

conversation we touched on the vexed subject of the Times’ 10p Monday

sale and its latest ’outrage’ - copying the Telegraph subscription

scheme by offering the Times and Sunday Times for pounds 1 a week (yes,

folks, that’s the same subscription scheme News International spent all

summer slagging off) - which is denting and will continue to dent the

circulation of both Independent titles. ’Well,’ I said, ’what are you

going to do about it?’, fully expecting the Independent to respond in

kind.

His answer surprised me, the nub of it being that the non-Murdoch

newspapers believe they have a case under the Government’s new

competition bill. To this end, they plan to get together to force the

Board of Trade President, Margaret Beckett, to confront the issue. In

both Australia and America, my new best friend told me, it is illegal to

sell something at below production cost. Therefore, just as the dumping

of cut-price Czech washing machines should be outlawed, publishers (ie

the Times) should not be allowed to sell at a cut price. Hooray, we

said, having at last found something to agree on.

But on reflection I found myself wondering if the Times or Telegraph

shouldn’t be able to sell for any price they choose. Seductive it may

seem, but the parallel with Czech washing machines is not helpful. If

you make washing machines, your only revenue comes from the sale of the

machine. But newspapers get revenue both from the product itself (the

cover price) and ad revenue.

So, in a free market, why shouldn’t a publisher be able to forego one

(ie cover price) in order to maximise the other? In a nutshell, whether

via the newsstand or the subscription offer, this is the route chosen by

the Times and Telegraph.

Funnily enough, this practice goes on all over the place in the world of

magazines and regional newspapers - it’s called controlled

circulation.

And it’s not anti-competitive: wherever you look, there’s no evidence to

suggest that, on their own, frees have ever put paid-fors out of

business. In Campaign’s own sector, three of the four titles have chosen

to forego cover price revenue to concentrate on ad revenue, leaving one

(that’s Campaign, for those of you who hadn’t worked it out) to earn its